Online Brokers Versus Trading Platforms

Online Brokers Versus Trading Platforms: The Key Differences Explained for Traders 

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Most financial trading is now carried out online. In fact, we are almost in an era where the term “online trading” has become tautological. While some institutional investors might still lean towards OTC (over-the-counter) manual trades and deals, we know that for millions of us, trading means accessing online platforms. 

Yet, there is sometimes a misunderstanding of what we mean by online trading platforms, particularly among novice traders. An online trading platform is not a broker. However, a broker may offer several online trading platforms. The distinction is important, not least because the choice of online trading platforms offered should be a key determiner in your choice of broker. 

What is an online trading broker?

An online trading broker is the intermediary or middleman between you and the financial instrument you want to buy, sell, or trade. It is the platform that gives you access to financial markets. It can do other things, too, including providing leverage, a type of loan that allows you to take a larger position than the capital you have. The broker will also offer other services, including educational resources. The broker is, of course, housed on a website, and it may also have a mobile app. 

What is an online trading platform?

A trading platform is a software system that you use to trade financial products, such as forex, stocks, indices, gold, and cryptocurrency. It is a software tool or system that is provided by the broker. You’ll often download it onto your computer. Examples include:

MetaTrader 4 

A type of software that has become globally adopted. MT4 is particularly favoured by forex traders. While MT4 was released all the way back in 2005, it remains the world’s most popular software for trading forex. Of course, MT4 has had many upgrades during its two decades of existence, so it doesn’t feel clunky or out of date. 

MetaTrader 5 

There is often some confusion about whether MT5 is an upgrade on MT4. While it was released later in 2009 and has some advantages, it is broadly aimed at different types of financial products. There is a lot of overlap between the two, but many prefer to use MT5 for stocks and MT4 for forex. 

Web Trading 

Many brokers also offer their own proprietary versions of WebTrader, which allows traders to trade from a browser without downloading any software. For example, large brokers like AvaTrade Australia will offer traders its own version of WebTrader, which will differ from those offered by rival brokers. 

Mobile Apps 

These days, traders can’t always monitor the markets on large screens, and a huge amount of trading is done on the go. Brokers will offer trading apps that give access to both the data and the tools to execute trades. For instance, the aforementioned AvaTrade offers the AvaTradeGO app, which gives traders a wealth of trading tools at their fingertips. 

Why this matters

As we hinted at earlier, an online broker is only as good as its underlying trading platforms, regardless of what else it offers. Think of it this way: Imagine you had a local cinema. It had great seats, great snacks, and reasonably priced tickets. But what if it did not show any movies from Disney, Warner Bros., Fox, New Line Cinema, and so on? The cinema, like the online broker, is a facilitator, but the underlying experience relies on great films. The trading experience relies on great tools. Traders demand the best tools, and for that, they will need the best trading platforms to be facilitated by their online broker. 

Do some research before you start trading

Do some research before you start trading

That said, the choice of online broker should not depend upon the trading platforms offered alone. As mentioned above, there are many different elements that make a top online broker, and not all of them are objective. The best piece of advice is to do some research beforehand and weigh up what you need and what your expectations are. Finally, we would always recommend using a demo account with a broker first. That will allow you to experience real-time trading action using platforms like MT4 and MT5 before you commit to real money trading. You can get a feel for the broker and its tools before you dive into the online trading arena in earnest.



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